Sunday, May 3, 2009

Yen Falls as Speculation Global Slump Easing Spurs Yield Demand

The yen fell for a fifth day against the euro, its longest losing streak in six weeks, and slid against Australia’s dollar as speculation the global recession is easing encouraged investors to buy higher-yielding assets.

The dollar traded near a three-week low against the euro before a German report today that may show retail sales in Europe’s largest economy rebounded in March, sapping demand for the greenback as a refuge from the worldwide slump. The yen declined for a fourth day versus South Korea’s won as Asian nations will create a $120 billion foreign-currency reserve pool by year end to bolster confidence.

“The market wants to put some of the risk trade on that they took off toward the end of last week,” said Greg Gibbs, a currency strategist at RBS Group Australia Ltd. in Sydney. “The market is seeing confidence in the global recovery and hence the dollar is trending lower.”

The yen dropped to 132.43 at 9:19 a.m. in Singapore from 131.54 in New York on May 1, after earlier falling to 132.45, the lowest since April 14. Japan’s currency fell to 99.33 per dollar from 99.11. The dollar traded at $1.3315 per euro from $1.3273 in New York on May 1. It reached $1.3386 on April 30, the weakest since April 13.

Japan’s currency dropped 1 percent to 12.81014 won from 12.94456 in New York on May 1. It earlier touched 12.78274 won, the lowest since Nov. 5. The yen declined 0.9 percent to 73.03 per Australia’s dollar and fell 0.9 percent to 57.04 against New Zealand’s dollar.

The volume of currency trading is likely to be less than normal because of Japan’s “Golden Week” holidays from today to May 6, Gibbs said.

German Retail Sales

The yen approached its lowest versus the euro in almost three weeks. Germany’s Federal Statistics Office in Wiesbaden may say today that retail sales, adjusted for inflation and seasonal swings, rose 0.2 percent in March from February when sales fell 0.2 percent, a Bloomberg survey of economists showed.

“Recent economic reports suggest the global recession is abating in intensity,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. “Improved investor risk-appetite may continue to weigh on the ‘safe haven’ yen.”

Europe’s economy may be moving past the worst of the recession, data last week indicated. Confidence in the euro area increased for the first time in 11 months in April, the European Commission said, while Germany’s Ifo business confidence index rebounded from a 26-year low.

The yen dropped versus all of the 16 most-active currencies as Asian equities and U.S. stock futures rose. The MSCI Asia- Pacific Index of regional shares Index climbed 0.6 percent and the Standard & Poor’s 500 Index futures advanced 0.5 percent.

Futures Traders

Futures traders pared their bets that the yen will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 4,579 on April 28, compared with net shorts of 13,695 a week earlier. The figures are sometimes used as a contrary indicator.

Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia and 2.5 percent in New Zealand, making the South Pacific nations’ assets attractive to investors seeking higher returns.

The yen also fell as the Association of Southeast Asian Nations, together with Japan, China and South Korea, will use the $120 billion in funds in times of turmoil. They will set up a surveillance unit that will identify risks to the region and provide oversight of the fund. Japan also offered $60 billion of yen-denominated swap facilities.